Shares of heavy equipment maker Deere ( DE) skyrocketed in morning trading on Wednesday, following Wall Street-beating results for the most recent quarter. But as investors rewarded the tractor company for the earnings surprise, pushing the stock up to new 52-week highs near $102 per share, there's a much more somber message in the earnings release that should have yet another industry concerned.
For the fourth quarter, Deere recorded net income that fell to $285.3 million, or 90 cents per share, from $351.2 million, or $1.08 per share, in the fourth quarter of 2015. But analysts had been expecting EPS of only 40 cents for the latest quarter.
Revenue also took a tumble, but was still better than expected. Deere noted this metric was down by 3% year over year, to $6.52 billion. Still it was better than the consensus estimate of $5.38 billion.
But Deere also announced a depressing forecast for fiscal 2017. The company expects sales of its equipment to decrease by about 1%, including a year-over-year plunge of 4% in the first quarter. Deere blamed weak prices for commodities and an accompanying drop in farm income for a projected 5% to 10% decline in full-year 2017 large and small equipment sales to the U.S. agricultural and turf industries. In the European Union, it's expecting industry sales to drop by 5%.
The fact is, the farming industry has been plagued by a perfect combination of relatively high levels of agricultural debt, crop surpluses, and a decrease in farmland values. That mix has led to one of the worst downturns in agriculture since the Great Depression.
And judging from Deere's earnings Wednesday, this farm recession isn't expected to end anytime soon.